Cree Inc (CREE) Drops AH After $500 Million Purchase Of Ruud Lighting, But Creates Indoor/Outdoor LED Powerhouse

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10:47:01 pm on August 17, 2011

Cree Inc (CRFE) has taken a bold step after hours in order to further expand its role as LED leader with a purchase of Wisconsin based Ruud Lighting which specializes in outdoor LED lighting.  In my opinion great move from Cree since LED lighting may be adopted on a wider scale first in the outdoor setting.   The acquisition creates a powerhouse in the indoor and outdoor LED arenas.

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"Cree is taking another bold step in leading the LED lighting revolution, creating a company that has an unrivaled focus and commitment to driving LED lighting adoption," said Chuck Swoboda, chairman and chief executive officer of Cree.

Cree paid about about $525 million for the company and expects Ruud Lighting to have a small impact on results for fiscal 2012.  The company is revising targets lower for this quarter and now sees EPS in the lower half of the previous range at .25 – .28/share and revenues between $265 – $275 million.

The stock is down about 5% in after hours trading which isn’t unusual after such a large purchase.  That’s typically a knee jerk reaction and often a stock recovers quickly particularly if traders like the move long term.  Let’s see how CREE plays out.  Technically, shares have improved considerably and I actually believe the pull back on this news could create an outstanding long term entry point.  The stock surged above resistance of the 50 day moving average following its last earnings report, and has been pulling back quietly to what would now be support.  Ideally, a move back to around the $30 level to fill the gap would be ideal, but it may hold at that 50. 

Disclosure: no position in CREE at this time.

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